HLF - Earnings call transcript Q2 2024 | Herbalife Nutrition Ltd.

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Operator

Good afternoon, and thank you for joining the Second Quarter 2024 Earnings Conference Call for Herbalife Limited. [Operator Instructions].

Following the opening remarks, we will conduct a question-and-answer session.

As a reminder, today's conference is being recorded. I would now like to turn over to Erin Banyas, Vice President and Head of Investor Relations, to begin today's call.

Erin Banyas

afternoon, everyone. good and you, good evening, Thank

Joining Chief President; Executive are Michael and Chairman and Johnson, our Officer; Officer. DeSimone, Chief us our today John Financial Stephan Gratziani, our

like some release Relations from we Litigation our more which available meaning of to statement Before are any forward-looking website. Page in both of and presentation on section under of statements call, issued a our cause today's I the differ Private earnings Reform factors to earnings include forward-looking regarding direct XXXX. The those to release could of that Securities the the begin of of you the important discussion cautionary our presentation Act in and Investor statement X the results within expressed would earlier today,

is of the by language. call will presentation content this and be governed customary, As today's

regarding call, addition, the refer measures. measures earnings non-GAAP financial financial during be that release to and Michael to In measure. believes non-GAAP unusual non-GAAP I materials now that, And information call comparable reconciliations these most items CEO, today's discussing additional periods for certain referenced. Please These the with of financial nonrecurring measures GAAP the the turn management certain will we exclude our Chairman to the and presentation over and will or directly Johnson. comparability impact

Michael Johnson

thank joining us. for everyone, you afternoon and good and evening, Good

to exceeded our quarter, by our we foundation to to adjusted execute continuing is top second impacted which In we growth. expectations. top our guidance, line initiatives FX a was financial And Our strong on headwind, drive continues we line and EBITDA are the higher-than-anticipated while missed improve.

reported XXXX slightly X our were basis Net headwinds. at due sales basis currency of a XXX down $X.X FX performance. of billion, constant versus up points Let's a while on basis, take to X.X% a look quarter on financial

XXX end basis quarters. We in million highest ratio and Adjusted exceeded marks X We margin deeper at points and our up reducing to our XXXX. quarter of our EBITDA reduced on will year total expectations. to June year-over-year. our we do John of X we adjusted and EBITDA X EBITDA margin our let was further total into ratio what DeSimone raising the the in Our by committed the numbers leverage end full accomplished me a Quarter the XX.X%, guidance, some leverage but dive X.Xx adjusted call, highlight X. later EBITDA of $XXX are of to adjusted remain

our substantially have We completed reorganization.

and Perkins ] leaders especially Miller the a done for in digital Perkins [ transformation. the as executive, incredibly proven e-commerce of and to continue We We'll Board Perkins' have technology Sports drive cost on world's of some media the roles our our and community invaluable company Directors. he's large-scale is to right refining leading even expertise continue and biggest has welcome it our and are focus engaged to our names, and experience to and and employees NBC our right brand vision savings. We premier digital platform. to we committed people and NFL. us, efficiencies the of transformations, in the health wellness more business becoming

high-level as to excite, through Our to distributors. training ] are and our rigor our training working. our We've recruiting [ resources League part like with and focus Premier Herbalife and alliance evolved programs on distributor strategic programs motivate advanced provide of

these I the are highlights. As said,

Stephan engage initiatives doing seeing and Gratziani, new very to we're to of about and excite, talk some implementing more a our want and what we're company, to we're our heart in the trends. leadership I positive grow their Now of distributors, them Under innovative empower our bit businesses. for distributors detail the little the President, and

decline, of recruiting was distributor consecutive League, quarters Importantly, like Herbalife which worldwide launched the quarter X, this programs in earlier year-over-year, XX year. thanks our to up Premier reversing

will the unlike August, to strategies North business of In to in our America continuing peers As and new to accountability our sharing which leadership the their creating launch company. This providing supporting ] by with for one-on-one entry development structure upskill an program in new distributors our is be other metrics training and successful next and any support distributor phase and distributors distributors. later more training at in key approach we've part mentorship ever program. our will provide Herbalife Mastermind had account call. our management the our leaders accountability and leadership supporting program, on, program on has leading and better and the a or the through is things, this for in This them we details that is top we'll and support Stephan go-to-market [ implementation engineered matter. of focused among this

hours world, months, few. to broad nutrition their protein and the a in a products we beauty North Herbalife events made And in XX,XXX time products little already has one record attendance thought the to our As India, to last about where hosted influential events numbers India [ we've impact. of over in were convened and He's distributors and North continue line and and in and the care a months extravaganza hours perfect you on drew provided get long-term know, had events the basis people HerbalifeXX of India. have range events. These people combined in name excited ] where events Bangkok, creatine APAC, and Delhi for in in leaders ] first-ever XX,XXX us America with extravaganzas X skin globally, from a America Verdelite of APAC, Bangalore [ We speaking to multi-city performance chips and Eric with in around marketing. relationship the products trusted and [indiscernible], a approximately we like America, the most in out like diverse and to and Eric has roll working of nearly positive been X U.S. Latin Thailand, network training over Colombia, including extravaganzas,

exciting going creating DMO Nutrition relevant talk nutrition of positive These the their products. dedicate Herbalife Stephan new distributor dedicate to at business about sports we're Herbalife. This time support behind to best time Clubs and flows, the more a upscaling including champions exciting is distributor sports. athletes productive, mentioned, exciting leaders supporting world. differentiator fueling by support the in key providing most ways to ultimate chosen and teams their some ourselves of Herbalife, the more for nutrition enhanced the distributors, their an some world legendary greatness the for is and is we of I As trends and in pursuit and lives

athletes, of our launched is Best Fueling why we their sponsored accomplishments. which campaign, proud We are incredibly just The all highlighting our

see in Paralympic We even summer are in some teams. are the them, we in science-backed XX ambassadors to You'll by athletes and Olympic home of brand important our bring and some and where athletes delivered testament products. These we're fueling X hoping a to believe them advancement this competing [indiscernible]. the games gold

on And take we're also distributors, way. vision our company transformative community and believe going world's in on. change believe We wellness continue We health business a products. we platform. employees, we the to lives. all, to journey and our our our the well in we are and and It's our of and becoming can time, we believe our little Most premier but people's believe model of empower

will in why believe over I'm it to over to give strongly who Stephan, so going future. in my and more details on we to friend. Stephan, Now Herbalife you, turn our

Stephan Gratziani

mid-March. Summit Thank earnings Herbalife in of launch you, Premier Michael. last numbers at the early our On recruiting League shared some we call, after the

Now to I'd like share developed. details how on the some quarter

especially up were future mentioned a consecutive is and XX in distributor prolonged recruiting, quarters an driver QX, Michael sign As his new comments, consistent basis, numbers as a year-over-year This in early distributor declines. new of opening positive for growth. is on following

have numbers. look the Let's a at

XX% As QX the side had of significant you across regions, can sequential over on see all up Slide QX X, left worldwide. improvements

year-over-year and was last over up QX over China, in was XX% and up up North every America EMEA recruiting region, XXXX. exception which same quarter importantly, QX X% last XX% over recruiting over about XX% a up XX% of of year. QX year. over and with talk was the Latin QX America the was minute. QX in I'll XX% over More

of talk up now over QX China. on last over the This the board. And representatives. program to in in recruiting loyalty preferred the quarter timing China, new the the XX customers the the about Premier to improvements Unlike a was XX% year. the let's QX distributors, where sales due was League same rest the program. launched of China, X% to of When League chose qualification includes across over launch world, first-line instead customer are led Pacific the with the preferred And the sales first-line up recruitment adding was level representatives the of preferred based XX% was significant which on new and on customers. This qualification acquisition and down impacted Premier customers, of quarter. launched Asia focus China focus we preferred over of QX significant of XX last XX% year. Those in program

of built recruiting. If you to growth right we way of leaders. in who different Borri, the plan. available reverse successfully have Note, strategic overall, top previous with its was in to what who the the of those out we Eric by his organizations the been the illustrated see long-term and not distributors, marketing excluded the During to of the business in This inertia Premier are due plan and distributor ] chart, with distributor, has the accomplished through alliance the to training the do creating year-over-year making have different which our you'll the set that the At of of distributors see typically the enough which QX, reinvigorated look President is slide, side marketing quarters [ to the Herbalife the All the launch growth team we is at doing level within create our see believe our members, by in largest will of XX Herbalife. the by entry but recruiting China declines. By company. levels the combination we level we refocused League, expertise recruiting we only model. a the

our team As XX% President recruited QX in you of can over QX XXXX and more XX% distributors QX last over of year. see, more

team, last mill team business. the QX level which XX% This [indiscernible] had percentage next our increase QX Followed is and XX% of year. second was by over over of QX last up Our XX% highest up good over of the recruiting, the and XX% year. over for leadership,

TAB As new One launch in the way sales to new program consecutive and in the new leaders, achieve about to we the these positive that ] customer the go-to-market in metrics refer largest of our distributor growth. our of recruiting growth quarter [ distributor typically journey year-over-year success have and within their distributors top the of consider on. leading And to with We are engaged distributors that to strategies. of quarters declines, help the drive believe group growth. the new following return this sign a distributor move best support lead this organizations will we comment beginning a which more members, how helping know company, team for X tenure XX organizations. A as groups longest growth them is we even before our on only volume of final are we

going this to quarter-by-quarter. build are We step-by-step, trend on

program also I'd mentioned. the to the about that TAB I like Now Michael for referred team talk to

done Mastermind We are ever and increased like areas changer. is sustainable term. the have in important biggest all long that we productivity. It succeed growth which will nothing program This helping leadership program, is we and in program new towards make believe difference we address and the X to that game will distributors before be development refer creating geared a mentoring, as about to launch accountability

increase North will effective program, their in have in in launching them program, leveling expand are this thousands in ensuring their comment and America this in of August, the Mastermind leadership. and potentially we which of is America. We're The I, the our members excited growth marketplace. In about launch coaching. Participating new key the to of help of Mastermind group monthly Herbalife personal and them leaders growth staying team other some developing be sales, program the reach drive distributors is North and will America evolving actionable that program and supporting their part support later see further account in alongside will manager designed of strategies relevant first successful August. further always could or and distributor we team We're Eric late a current data recruiting and leaders to a and will of first to second we their will distributor go-to-market most by encouraged with businesses. skills a up have expand And metrics DMOs lot the them this and top markets. in which peer North TAB quarter [indiscernible] new potential our deliver a accountability into and it

a master to classes program over to it India and and aimed multiple With have models responded happening the new John in X John. launched in positively, we you, markets. new Mexico. I'll Europe, had a continues we Latin year these of been we've in also are qualify. and We lot traction the things briefly, have seen and In XX the In Mexico, continue markets will countries. types other President team This pilot members exciting Chairman's in year numbers we've with It's since of turn growth Club which at DMO that, discuss gaining stimulating a outperform. America,

John DeSimone

impacted begin our $X.X year highlights Net the second points FX basis key I'll coming of financial by as FX more is currency for getting line headwinds. On our Slide Michael significantly anticipated headwinds was driven into Stephan. last The details. by quarter. decline you, top had And slightly. net quarter were than the on with basis, stated, more were we XXX sales before into sales a Thank up versus constant XX billion.

initiatives essentially significant made $XXX Our reflects EBITDA million and range was profitability. CapEx have point The improve our our of XXX our the second second we in to EBITDA XX.X%, $XXX $XXX guidance was of Adjusted million quarter million. million, for the quarter QX to a versus improvement margin adjusted XXXX. guidance $XX the basis was the QX midpoint of progress exceeded range.

In of profit we primarily The profit gross capitalized in basis $X quarter. QX approximately SaaS was in year. margin XX.X%, gross up quarter incurred last compared costs second we year basis actions have addition, XX relating approximately of increased million implementation XX costs taken costs. to to impact was points the margin improvement provided mainly points, material pricing points basis which of past the of of the partially by input by driven benefit, over XXX offset raw increased approximately the

included to our our implementation Second relating costs million related refinanced costs of quarter that adjusted the results. the of and second quarter. Both $XX items was our restructuring excluded and of $XX.X of of $X.XX million during the EPS program was pretax debt pretax approximately from these to are extinguishment

of second the the versus $X.XX, which Our included $X.XX XXXX. a headwind adjusted EPS for was quarter FX second quarter

in from rate Our an adjusted effective XX.X% $X.XX rate tax effective diluted quarter EPS. The of quarter which adjusted XX.X%, the for up second XXXX, was second tax approximately drove to unfavorable impact the higher mix in an XXXX debt recent refinancing, and due changes expense in interest was from primarily events to period. tax of elevated our following discrete in increase income, geographic expense

million for of and cash leading to look $XXX a our of quarter further the in agreement X.Xx for Credit for a between of was XX% to of the our year our expect flows income rate full to $XX and restructuring cash end schedule be on were mix release the second EBITDA quarter geographic earnings of forecasted EBITDA. related approximately based XXXX to $XXX continue to effective the agreement ratio approximately reconciliation press the million, overall adjusted of and impact We the million credit tax included reduction adjusted leverage at and interest to strong our expense. Operating EBITDA higher Please June. as payments refer presentation program.

XX. in are offset of $XX point pricing said local about This well earlier, sales a which Slide We performance. country sales pricing address a primarily in sales million basis, overall approximately $XX our continue drivers $XX or On market-specific as was volume to which conditions, of Mexico down the line X.X% sales year-over-year, relative mix of net drove year-over-year increases implement or was increased by approximately with million. sales overall $X basis see increases. Unfavorable I as CPI generally we more FX, as decline was the an million by net U.S. in XXX million regent of as driven lower to benefit our reported Turning portfolio. were headwind headwind. a to India to and with nearly than net year-over-year X%,

Moving to XX. Slide

regional We currency local basis. quarter. sales X% with impacting the FX regions have second reported the on basis. In X these regions net currency a sales On net of and quarter, growth sales for were reported our local the each on basis of a reported X% results Latin net a negatively X on a in up basis, America, up

in localize the business modified in markets compensation the the and reduced pricing offset impacted were excluding During could year-over-year markets. up be the year, initiatives second net in in of and Mexico, other implemented these this conditions is pilot variables. X% we year-over-year positively most on Latin declines. currency certain socioeconomic and than based sales pricing distributor down many to with of designed a volume quarter sales program This country. We markets and EMEA certain qualification into local America pilot Favorable region, believe more opportunity impacts expanded that the possibly optimize net X%.

FX headwinds across year-over-year benefit. The generally unfavorable in region. the the offset However, markets mixed results net more were the than

Asia local encourages as improved recruitment QX down continues China the year currency customer continuous stack driving basis. improvement we basis, approach region, Pacific more a month, of decline China a in program launched net with new QX. the on year in activation an XX% were a reported aimed for X% basis which faced on with year-over-year repurchase result this outperform on a a and and reported sales versus customer a of last The a X% stack. Last surge net sales benefits. X% were difficult in local up QX is net India a on currency. China X-year and X-year in at X% customer in basis. currency in sales comp China, QX up sales customer-centric local loyalty down while to year-over-year X% reported a

Our are we the year-over-year and new net customers U.S. positive improved are first trends business evolve is by seeing the encouraged decline quarter from driven the China, X% second joining. In continuing was net in by to respect sales primarily North The America, market. to in the quarter in XXXX. trend we of with reported sales our

and distributors. the Stephan months remarks, distributor opening As activity been initiatives have in up from launched past new encourage his new year-over-year noted in the few over is recruiting region recruiting and several earlier to

While the taken encouraged and have gradual than are we liked, shoots recovery seeing are we in the would North green America has by longer improvement.

XX. year-over-year Slide X% of drivers to over EBITDA strong EBITDA. Moving million We QX adjusted or in see $XXX XX.X%. $XX in increase million with came adjusted at margin

in We to quarters, the rightsize testament team costs seen business. and have to not X the of which like done is the pull this results a work has out

headwind million in increased at to higher headwind I favorable bonus XXXX. Technology back Turkish employee our related mentioned an of EBITDA. hosting drove SaaS bridge, impact And million in price profit currency reduction partially be Looking were primarily the Unfavorable earlier, year-over-year, by gross approximately Argentinian half in input $XX due the can adjusted of is lira benefits quarter, year-over-year the margins, accrual expect to continue in we and fees. I last costs and approximate stated up the QX, as seen to the the costs. increases, year-over-year $X peso offset movements, from primarily a

earnings our on Slide structure. call, provide last XX. million. $XX Since paid revolver have to our our update an I'll by Turning down we capital

in the amount previously debt of this majority the credit vast as to our that we what completed these of refinancing as XXXX. $X.X billion on pushed the transactions April, XXXX more or we XXXX transaction facility we net reported amounts a of outstanding is well As result maturities notes. The out than all and our half repaid senior on a secured outstanding reminder of

with of X.Xx end by to goal achieve only the the we on sizable I XXXX, maturity repayment of to total the following bonds. June And XX, to which of remain further the $XXX reduced XXXX of faced the our earlier, the repay. our as prior notes, being noted we track With the target XXXX, to XXXX we ratio million leverage outstanding on as Xx

to XX. Moving Slide

will our and quarter third We full outlook the review for year.

sales XXX of For points This down by net quarter, the of approximately be year-over-year. is we third driven the expect to range basis primarily headwinds flat X.X% year-over-year. unfavorable in FX to

range We expect EBITDA to $XXX million. $XXX the million adjusted in of be to

take impacted of which the the a so be million held we XX. $XX place large of million as by first a purposes, third Approximately has substantially complete comparison this have currency last also was negatively far, program. This only of program remaining. this in the the in impact fourth by of comparison year, quarter about of partially the event For a in quarter about $XX with in the of the implementation distributor million favorable were to June amount of expected From back remaining small the that is year was year. The will restructuring year-over-year of year. offset been program costs standpoint, paid to half with accrued half paid cash $XX be

X.X% reflect million expectations down million outperformance Our planned we QX, to currency a to of reaffirming the are net And range of up in we our for million quarter be year range our half our year. outlook and our our expenditures $XX remainder XXXX movements the a volume raising $XXX last to and in of million. The in year, full full the EBITDA adjusted versus X.X% capital third May. are expectations EBITDA from for of we to in partially expectations $XXX the by adjusted CapEx $XXX are lower for results the initial offset to the to updated year guidance $XXX increase of as expectations million million. Based on sales our have first for $XX for to year expenditures unfavorable

of is $XX in open CapEx. A of a As before be $XX planned our which expect up costs million, for year, capitalized half we we call back the to to implementation to questions. of comments million we range SaaS couple the incremental look last the to

creating and current we good of than had strong of bit happening at there's foundation a a growth. were sales a Herbalife that while expected, a than for expected lower are things headwind lot we First,

from prior anything continues the that distributors ever recruiting grow training in Mastermind done quarters year, growth the industry. Premier is versus XX of unlike consecutive is distributor coming coming is taking program experienced how know businesses. Herbalife reversing New to build in And to which off. that August, decline, and League is

training We in trends. and level a continuing are that align consumer accountability to and taking ever innovative higher than before. We're launch resonate local markets products to with

We have most we compensation results from positive and are markets. piloting the American in Latin changes pricing

Our by our are athletes sponsored important Advanced brand ambassadors Nutrition and to a testament products. delivered our

strong. Our profit is

Our restructuring are to complete, is and and we reduce substantially expand continuing to costs at further ways program look margins.

Our was there. our payoff be Xx off the the the over year, Operator, We X.Xx, our while XXXX, in goal cash. plan we use questions. And leverage that value pay that primary of at stop will the billion get end This remarks. our to opening ratio to of end of and please to holders, debt following Xx bonds. next open want remains the is concludes $X call equity to don't our next by X goal and for of to transfer and our X free years the to

Operator

[Operator Instructions].

question Jeff with Sinderen Van from first line Riley. of come Our the will B.

Jeff Van Sinderen

Great.

to of wanted guess, little if distributors happen American come do around focus of that's a I could. just what to around. a bit But to new really America there North turn you're for we adding think there green other are that and And you stand fruition? on to do that for I that on? and North sales you a the touch turning you challenge shoots I to So want think know minute, where in might needs process to been you

Stephan Gratziani

question. Thanks Jeff. for that, take I'll the

of theme XX,XXX go we Clubs to U.S., we Nutrition that of this kind discussing in model very what is been more a if powerful locations. have back we've as So the than

a the X.X to buy at most I through small XXXX, a and a a for into they're customers. them the coming these average transactions of these clubs. And is becoming, on about ago, and opportunity example, in to energy XX tea we $XXX really for transactions, and there's most yet million of in in quarters customers, couple huge healthy X% terms think shake million and of us percentage of club business [ because very of conversion coming for million preferred are customers in of ] distributors. The and even less X% talked

us from a businesses are not And great a is multilevel model. so for a the and result that big of really organization to food only transactional of do and building them but kind transformation model, people go service into helping going more opportunity really marketing, build bring

when take conversion happening, what's a us. So these at look at opportunity we and worldwide clubs and look really huge the we XX,XXX for they're

team is not Now master mine, that's the terms actually club this this spoke the month question exist. a again, like in get master is Michael them? of level these This do who [indiscernible] we support people, does is next model where transition? it. We've how do And for never something leaders. team, exists to all of do it to group so this. are How in of help for many them owners team, And of this team, ] President it. support really done help how spoke of these TAP we [ in we them that industry. The it the something John through

of As you was thousands a [ kind Eric partnership thousands felt top a for paying they know, Boris why one very the of some program creating with type were a of our that leaders. coaching and reasons that information. relationship because ] And a delivering special and already strongly mastermind of dollars of to we or he

every going of the in along next through implementing the the help that to years carried the models able successful leaders, is deliver very and to It's high-level a so of be not weekend in them really a program to together process most transition them of way literally be and be And him our going that's leaders are all able here to our to to step through. out to help put a potentially top States supporting this couple program which a to with thousands program, the event. with United

had getting to going part it's so is account to is on program but accountability, pairing to going education only of doing part and shared, data the other and business them where Another with actually group actually models different that the businesses. types never the How which looking basis. is up everything metrics on are be this the supported we've they a not flows, of management peer are at similar leaders through monthly coaching being and be key the PMOs and before and that working, content

fundamental very So they're sharing that's well. best very, dynamic works it certain and practices. There's a

to They're Again, in So transactional customers we as of bring that's transformational them us is there. opportunity a be more customers, we to huge how really just The we're very which see for a there's the get what foundation do. to and us. of big for going there. are customer, opportunity this really

question. that answers So hope I your

Jeff Van Sinderen

said Okay. to here, new high of I could a thought kind Great. what just the rate. know which the or guidance process That's bonus the what through multipart I and you're of down Maybe a charges cause into have distributors your range the headwind XXX the question around you EBITDA bit helpful. guidance more low And XXX restructuring come [ FX maybe anticipating for implies better. of EBITDA end at QX, I realize you guidance trying little but baked components most and end. then think might bps, exchange booked in there's walk you of for was But I your us ] QX and think guess to year-over-year. about of understand sort indicated you I QX. you accrual are

John DeSimone

Sure. Thanks, Jeff.

a couple So of you on hit things.

of range back an ago. about it, EBITDA and split X $X.X thought it's the million, So standpoint, the impact QX to somewhere thought QX, year-over-year million, what -- versus in there's year-over-year that what from sorry, FX a year, for the that one call is right? -- $XX for component from currency actually quarter quarter ago. we between an equally versus I'm a EBITDA it is we or pretty half So it's

So that's movements the currency just months. an impact last over X from

higher bonus that talked We about the talked the you past. accrual. in Second, about

events those but -- events, unique. events not QX Third the is, in is of are there some unique timing unique

it event place August. have maximize Japan. So single in event. happening year biggest That [ have we a QX add some expenses. FCCC our to And ] Italy that's event plus, That pretty event in happening last QX, event we takes do in distributor the is place in in August in usually for meaningful unique took and

so say moved to some got And QX. -- advertising that and lastly, I'll underspent promotion QX and was in expense

less you those So big drivers guidance little sales too. -- are the addition -- to saw a had an in bit of impact sales the

the far and sales, and had just then and impacts movement if expense the to X with slightly by are So those bonus I promotion. line some biggest recap, on events and lower FX, advertising

Operator

One moment with Chasen will of And for our Citi. Bender line that come next the from question.

Chasen Bender

Thanks stay afternoon, just John, guidance to everyone. Great. the on theme.

the know on hoping little clearly I little hand, below going elaborate about came But down have year a $XX XH looks net my I out was other million million. like the could FX well. sales you it net you productivity a also guidance in called bit the you $XXX sales of question, change For the the bit more first worse. full implied guidance guide? midpoint on 'XX in about came And

to new going with this [ You're class. mastermind ] productivity initiatives

on some outlook can driving additional additional million lower in perspective So give the just $XX you second half? that us maybe sales what's

John DeSimone

primary Yes. I mean, it's X drivers.

expectations little takes of the just Turkey, it's a for grow because name China, transitions that on the we that expectations talk our because China, China, handful the of countries of versus going expectations Indonesia, underperformed expectations about to So changed in the lower but China so But that volume we and but we right? And few. can more to comes customers, QX program focused they've out, a longer strong. changed it's from implemented, a

a few countries. just So

back by meaningful the So determine then biggest a net impact And profit. probably change the has year the the guidance. on a million that's ago. a half on that's we where in from XXX sales, you impact a of year-over-year the That, far, volume. just were is impact of midpoint bigger half Currency quarter guidance. And of the from can a point And currency. the back in year, impact $XX for basis

Chasen Bender

for roll on calls that in then judgment could those overall in growth success to markets? would countries then more benchmarks called terms this sort of out you out you bit a And program you the that contributor globally the looking subsequently again took I pricing are reduction roll pilot that America out you other in was to that little to strong of expand quarter. it. we most see you that. What Mexico. Latin Got you're in Obviously, of in hoping a what on terms lead related, But price net and line a make and whereby was once pricing, across sales ex time might

John DeSimone

great a that's question. Yes,

the pretty approach the system with is really given socioeconomic field the to we're we've start let's made. in. XX globally. not had the we've So the playing level that's changes that Herbalife, the distributors strategy across a our to the Historically, markets pricing that compensation And -- and reality the behind that much same differences

most price Latin of can reach So thing. Central we what South we so did That America specifically and was the America, America, was one consumers. in lower all

in us, compensation plan margin per poorer marketing for up the it for customer distributors And and make some going earned qualify countries lower purchase by percentage low. way, of Second, a the the the everybody. actually to by average lower the bit because distributor is the plan than little pretty third, easier it's

almost And unlevel of set, creates been lot so do. effort an that threshold more countries that the customers other field. and lot more to previously need had they a than a playing reach and

earnings variables means So distributors. the within ultimately those for that the and the is company earnings do what earnings trying and country for a to to we're maximize the optimize

are at in offset enough volume decrease that is, money more we of of only generating bank by increase putting not these the we're making the the changes. the but So end the in day to all measurement success price

objective. that's So the

strategic. I think it's

an our important to are we'll excited in what it are determine motivated. expands results if look and ] it's leaders initiative, the agreed to. And think And the distributors it. once In those can see too, we'll look there'll results will think need of case, market it? Sam [ in fits a I bit multiyear from the pillar markets very this. with They've a ] been pull think that where variables It's which about Pam, in that be future. at have we're at we for in Sam leaders, the Cam distributor I the it expands and they I markets. [ say, to that little change certain

future I of we're think So element important out. starting an growth, strategically but just

Chasen Bender

helpful can it. And Got more. That's if then one ask color. just I

probably TAD leaders which that's pretty are have this already versus new focused growth on be it seen for of up. incoming are productive a top about leaders, the new sales seems line sales you clearly, who've leaders you to think should introducing the help program going obviously probably like to need who how leveling But you're it, For sales and a benefit. bunch

is, question term? the should about call sales productivities established stepping think of mid in leaders the the over, it, growth of new to how of of sustainability So I terms versus ones the the up existing longer

Stephan Gratziani

[indiscernible] this take one.

So a you're top-down right. approach, So it actually bottom-up absolutely right? is and

And world their and right? in that United of best-performing everything to I are, or around happening company, the at for ones now, Kingdom a of First way, sure, like supporting of it part have a they the skills in currently we they're go-to-market. Strategy -- bring in the that entire budget highest all, it out lot to most right one have of ones relevant that club. And or of different strategies, the would certain effective actually or that's of is And have could now, of because organizations is responsible a creating the ones as especially have because looking markets, taking most as that make X that necessary. We're and models recruitment we the the a breakfast [indiscernible] the probably is are of new productivity the ultimately amount are And some certain spread that we they're the the fits. that adapted that sure they models, the of the level the countries of to being there's and benefit benefits created last X make out of the tab are the distributors, they're years. right the which supporting right like team now, from leaders, place and geographically go-to-market has of of by that version responsibility are over that adopted them model a one in lost the say level amount can nutrition [indiscernible] top they're that the that's be.

need to the then company able and download the that. that extent people with able to to it and understand we know you'd and of supporting action something United come it. it very as them the doesn't to it, Go understand back, information, sometimes And all, actually to to support so in to really communication, the unless model a they details that U.K. through facilitating transfer education have to are it because be get being That's try the the happen have doing Kingdom that's implement the someone naturally the have the person a implement an to process.

and Eric. same having us are of to then mine]. we the And League to that do going program part Premier that's training, the [ we allow at time, the top do this to down, want So from is master

success at looking new an and onboarding are distributors We process. holders and

this so it's a be integrated top just will approach and And holistic, down not here.

up. We will bottom go

time to in this or that but roll are But considering we now. for taken, mean it's your for Now at have we We've process this a plans going the months process. X very, with longer-term take is to is out. X and point something only it's just very I been -- not well us.

Operator

with of Hale Our from next question come Holden Barclays. line will the

Hale Holden

the of you to or years as chunks? go paydown the target a new, next it new of debt me. couple in years over would X John, the that it billion guys to it was $X take Is at sort you chip quarter felt pay more and like next X over every expectation away new,

John DeSimone

down -- news, it we're over $X committed So next to is well, okay, to that years. X paying billion new X is the

back buy to going I to clear. do are Are want the we And what think up is coming going to about free make question cash? XXXX, stock? that been we that's it we we just down once pay

that We pay best the we continue down the of tax debt option given is continue under at to think the circumstances, this debt. current the point, to cost and of rate

I from call. takeaway an holders. the And to that's transfers it think just think that I So [indiscernible] due important equity

good think I a backstop. So that's

circumstantial. that the the It how penalties we're we will the back maturities be how debt all and much cash early what generating. depends buying and for of Second, do on are

extent are to that the So I'd can out interest high. do that pretty costs quarter-by-quarter and the work like economics we because to the

Operator

One moment for Davidson. with Bolton-Weiser our of that next And line will question. D.A. Linda the from come

Linda Bolton-Weiser

Pacific. give color on I So if more a little -- Asia you could was wondering

I than in explained it projected we China. had comparison the projections And countries a worse quarter. prior few bit in first than against you mean, for, the a Asia mentioned Pacific in that lowered an really I you easier think year weakness you was the but quite

give So is little I'm macroeconomic execution like a wondering, just -- -- there? or Or in it more the you what factors color can something there?

John DeSimone

Linda. you, Thank Sure.

that one, growth. the a of we of actually has Number stock main a places. for different issue with that of of bit driver large organizations had couple lot of a one a Taiwan, So the is products one in there

I us. the didn't that's, now. at help engagement opening COVID, it's longer little past an by another just and way, market COVID bit But were But the like of that we big So or so the little in than reopening they've been a bit had a about hate markets. to it that impact. Indonesia, during clubs lot up that's and had because very also a seems created, far talk Taiwan which of for. [indiscernible] just it's taking the hoping being closed

kind the Taiwan, of ones. are so Indonesia, those And main

Let first think a because the that I made they for really it's really, when because in a really conscious anywhere unlike important decision a talk customer, preferred me a benefit never very up bit preferred time, sign preferred really had world, had China, In to they China China, little customer no as benefit. we the there's that China, about entire There's a no in program discount. just customers. to

mean was that, it's to focus on very, the of an And market. I opportunity terms area a needed consumers it's that really just consumer so we big. knew because is that we huge very there in

of first that League. why actually And give developed been benefits bit focus the it's year. for last on -- over And purchasers we preferred what QX, QX I'll over it. But year the significant in preferred a drove and customers XX% increase And little And of really created loyalty so customers. a customers there QX in even XX%, the is Premier in the we of had when China more we a program increase preferred over the over but importantly, QX, of an well. as really the information not did last amount on we it only also launched time, it over that's

because, a productive it compared And so products. -- of us they to when they're for build representative. are success brand because sales and representatives tied become and company's then it themselves for terms that foundation people them the and you're a sales of about is to they later it's really India, little to active had does more talk just raving the us factors have, builds more bit the obviously, longer the allows a better kind this they transition India But what in you and in that purchasing what maybe become is for less of the customers results, they're one the brand a on bringing this to fans. It is more in become you and foundation, carry to a benefit in as the have, the the products, of customers, by this way, lot they're --

these some It's us as future it's bit and are to going exciting things that a so little a company. of take transition, And a time. an the but of direction for are

Linda Bolton-Weiser

guess, ask new I or guess, Okay. Can at you American success I so also the builder the North convention, I it. level -- call announce [indiscernible], initiative, could

to upline to some it up higher pay more. lower from distributors designed down I level. guess discount process in explained And peels off up that's order to speed of distributors that you profit getting So ones the new a

in to incentivize kind to some needs go company, done at the organization drive a selling conceptually, the So mature of to guess, from that higher-level need more distributors there's direct be I'm levels? the Is away of that wondering, growth that, do just where as to to future? something take more if lower you needs of on the in order more in even I

Stephan Gratziani

to that Linda, the for that that spoke business the the little can so that of it join look earlier, grow into making you as more around next that the level sure making come that is to opportunity we think, get bit a wouldn't aspect the -- because become right? are a they keeping and certain point it, Yes, and a a away about to in want really, lower stay a what levels. diverse in factor if greater successful of this just and markets I it a they're it's taking success we higher you're money at it's as a company enough can of the think John because that more people level to to attractive the them. there's very company they they levels in financially that compounding the stay all people say exciting to quickly Really to from get does business, interesting and that that it's opportunity where want is that because then just And I achieving they productive percentage. They're are

these So now. actions taking we're are some

idea in that to this make little past some the taken it's little done these to leadership outside that of of it's needs while, time the is bit adjustments, of things is a not an we've way LatAm, the just it a of bit. example, for Mexico, maybe aspect to taken a a but Another it's as change in like understand new

distributor this the on where following coming the we're requests lead for. So and are

your money, and staying at people other right more overall, there people the of time overall. it's becoming in people bringing will more and be successful, for the more answer and support people joining, to to believe I are business more more the this question, good market way So right around the making longer people,

and with we're accomplish so And objective to this. is this really trying the

Linda Bolton-Weiser

to on Premier the I about and it bragging I'm League more great that. Eric and I I maybe at guess, does the merch still order Premier I learned, But [indiscernible] all I rights not that. that? other access should get who [indiscernible] give and somebody sounds it can then understand else and just too, ask, hats sure training What they League. guess And and the more than they different Extravaganza Okay. to

John DeSimone

Yes.

the that So focused elite I number -- thing, yearly there. the in. if say group on They is most are, a important on an would They're amount have right? one, of They've basis. people we part actually significant of it, at training look out brought this a they're

So the really they builders. are

to and we and distributor by the had, focus the really first and just that having were the way, our excitement the So amazing and was leaders -- energy call access qualified. from

builder a a is This there. training, So very part nice, be to also lag a number the one It's the there's Everyone the by important. is differentiator way, aspirational. that's of program. business wants

how many numbers our and of terms qualified many raised this qualified with at would have or our in year what this estimates would actually have how seen fold X, last it's X people And and typically we year. if so people look we've time done have year, X, we last over

certain the having leadership, with higher effects and program the which that's engaged, leadership, And the having which knock-on positive put I is just higher business. create towards by just the actually. why has of happened lot means it focus actually a of building energy more to it of that levels recruiting a more of So numbers starts think amount seeing you're focused -- that's

training, it's for leaders. scaling swag. and It's focused businesses our So than yes, it's focus. The the more on building

a different to [indiscernible] this So going impactful. lot is of be where

Operator

the with line John And that Mizuho from will come Securities. of Baumgartner

John Baumgartner

pretty there ascertain And really QX? numbers, growth, factor? remains it soon at might the Maybe of the to you too Is come you QX, catalyst think factors that guess, wanted the Or visibility to there it first think growth [indiscernible] any do which Exiting the the for strong. I to this of are growth. point, on I simply the pop have back explain I drivers distributor out any off, started the that? other to first Eric into greater was

Michael Johnson

that, John. Yes, I'll take

very It new for also about talked settled because April were There that we it. when early would number a first kind the program, into much the it and on about. like is we you're people So was -- has talked maybe giving focused them a what's the we for early, was one, we been But it, driver promising also saw some, of Premier in say, really novelty of it that was initial really I obviously, saying. qualifying Eric has focus recruiting, building a driver. been and League but as not Access that. definitely as into increased month to like

a is the remain to single This in a and training. the So and just will focus, a a have let short which we're seeing is thing, because is the it's qualify and year most business just, the program. it something, focus have me not it's think to program building term every this access qualification for and I to hey, on a long-term important long

there's support. that part -- to is So new and there's a I definitely access would it say of training program,

everyone there's Mastermind things, [ have to One ] part end be the Premier it's [ that early the productivity most going a program of that it's they the for that qualifies about bit training of to the being that productive. League little be to, master because will a eventually because talk mine a ] the the same the group in would it of up people access

and that we the becomes which programs committed builder X company. program most long-term it level, leadership the see emerge people, supported productive really, eventually, business in drive so higher for And will will this just these higher the

we've answers that done out. support this company the levels. throwing and level never a that lot long-term little more There's but we're than I a plan on So that thing it's as just for of this a of a hope before question,

John Baumgartner

Okay.

XX% from that whether explanation Coming this price adjustments But a in sort is or where the of around or just then became sense up starting understand pricing And And market take. too feedback this LatAm, you're this a since model. give channel? probably the change. Were of better back wanted prices for follow-up I the and catalyst that the the Okay. COVID, Or jump cumulative think makes terms just outward? high, pushing your for Great. to then is for I is John. follow-up in initiative of the to you the category inside something receiving beginning

John DeSimone

actually me Well, over Michael started the ago to I more think maybe an it at initiative, pushed from even time. to years started X%, X% about and

markets markets, in amount had our was of certain because be Regarding products in products. to this consumers. able pricing payout to seem our certain of only that we because skin surface products those to with make the associated top of And of

lower a more them to profitable that actually with price payout from different So recognizing years and it it consumers. standpoint of do, reach some and communication be we trying with to started a to our share us, with were a with can what of off trying with to associated can distributor it dollar to leaders if the build more started in and us we risk trying

happened inside been in the more on it out, ideas. past think pulling is I in what's it's maybe started those from so but And out outside recent now

John Baumgartner

thought that flexibility I of impact basically the where thinking the impact have It margin having with at guess thought without creative program, on that the line? on Is model. margins if to kind you But process? transformation you impact of pricing? more that to can sort gives the basically savings going this you reset the kind overall may of Is downward bottom absorb the restructuring more the the not this an be broadly, it's you that do more is have on process, of have the you now out much scale roll broadly a if margins, it it

John DeSimone

more So I offset mean, than I it. think we can

then more types these in of also pluses as impact as pilots we this think negative won't changes. actually a SG&A. to our there's contribution And see margin can out, and you see then a So pushed nearly profit. gross distributors to gross I reduce minus you'll payout profit of impact maybe But the because to structure negative

fact, of of not necessarily the be may, majority they the smaller make tier opportunity plus does some sales. the up these it in of think when with So countries doing consumer. that we're to small countries top that's this offer pricing because the big kind the countries that the you our But an of reaches only

Stephan Gratziani

this John, to And also. just add to on

make the we're really things people recruiting. in it recruiting you the because if more growth it's is I of leading worldwide because at seeing kind does opportunities American One opportunity terms look Latin does more it that also in interesting for the the that And interesting. drive the of help think to of the numbers,

more And that are coming more really customers people, about in driven, talk so go there's to more the that's products They the people opportunity opportunity. are affordable. are right? So more excited because

what actually looking people buying ends which that, So products, more happening what that's more we're drives for. up that

that also it aspect So important. that's there's of

Operator

And line the that with Martinson Karru of Jefferies. come will from

Karru Martinson

Just following we up pricing about mean, thinking half on I impact of are the year? and how the second that, the for of inflation

John DeSimone

[indiscernible]. price the to continue increases for We'll take

our America. Our a to like comment. CPI. out South make we're America take we we at local In continuing strategy of price That Central to something South this and look, and until be shift or America Central continues [indiscernible] general, take a in did Latin

back half that's to in continue year. the So of going the

And from volume guidance again, price -- a were that were primary of to ago and and drivers and a of our different the about, quarter lower compared guidance changed, net year and to the of the we I'm sale sales ways, the it where cost where have compared looking relative changed quarter and it's an we to versus versus so quarter to last asked was couple at the last in half ago. is talked ago. Nothing's quarter guidance for a some half incremental back year guidance. What's impact started going to this respect second our in we of repeat with because that for The changed a it I was things the net of in countries, compared to that year in currency. the last Stephan an of think

versus currency. guidance though For what give example, guidance impact negative end guidance -- we those negative points. there have Inherent even It's specific and the is the in at now year. and didn't XXX in versus quarter -- when it's a net for a last the a quarter gave thought guidance last XXX sales we third the volume QX, of we quarter-over-quarter, last quarter. currency change basis That sales net for basis ago. Even quarter, now point has QX are at mostly we our volume, to drivers impacted in

Karru Martinson

and we're correct? remainder of cash generation, on And generated quarter, here, said still the think debt on for the with year, you understood. the Certainly, I this year cash just 'XX next then track the down repay, X/X to last pay

John DeSimone

X/X course, million see down -- about $XXX I administrative will sold we I is you cash an can we generate I said not did sell the when way our expect to and about needed will this pay in on be the $XX exactly that. to [indiscernible], we And still generate of the repay. building about of it. for it's the talk when what repay to I Well, cash said we and able What year, talked million. to we're just track we for didn't

that we got So into. cash

it going that pay but year. So mean down also this to helps, we're doesn't

enough able get whole investors be [indiscernible]. the comfortable was to what that the purpose it cash to pay comment of to we're down Just generating

Karru Martinson

will actually Understood. And debt of proceeds was the I repayment, my eventually $XX correct? to follow-up was million then go

John DeSimone

our It's fungible, we mean it -- right? goes cash in flow. I have

cash Our sold have more cash flow It building. fungible. we means had would not just is we than have have the

Operator

will William America. of That Reuter line of the come with from Bank

William Reuter

have X. I

a little trends out and the gotten difference that a on total and I'm the which confused that little Can first, bit then couple the questions numbers. getting, of I've clearly? you new The a it, still it. more between the very you're in are lay positive distributors distributor about

Michael Johnson

So you're about total? asking the versus Bill, the new

William Reuter

when But very total -- the like don't were I numbers you recruitment, bridge favorable. the the you you And trends those quite could the -- numbers, when used, net look used, are were you remember numbers? but not but mean or verb X if the I good. as adjective you different the those Yes. at discussing

Michael Johnson

don't something think I sure. I yes, discussed -- think to total don't Maybe just be was talked numbers. total. talking we've the don't about about I we I else,

William Reuter

the thought that the the your were looking would at numbers slide. that Okay. was active be that prior in I to not in trends versus case? the the Is there numbers difference call I recruiting different.

Michael Johnson

to the on, So Well, numbers time. cumulative start right? add over it's recruiting

bringing month, to those active and if starting the you're are month the that next active. those are activity is the that stopping being rate X be adding another and x-amount that are So group joining you're in next actually month,

tail over comment kind about you is point. the months in, quarters the run recruiting, we're journey. What time of and up add-on consecutive didn't talk And there's happening consecutive There we having and you'll beginning XX which ends made on right? up then and starts be So point, it, of the right? and to people that's point. happening consecutive add kind at have had quarters the in is end inflection is we this you've inflection out that add of that a at now So why as all that's time, less X will But up the reach you you specifically of quarters that the the meets that. what to actually ends decline XX less when starting quarter those to

numbers, point that it you may in seeing but be not total so now eventually, the driving And overall active come. will

William Reuter

about out 'XX leverage seems operate then is when ultimately Is set imply target with levered that balance it $X talk reduction lower target post goal and your you by sheet 'XX? than I guess of this have Okay. of there your that And you've then is Xx. in second my versus and for 'XX to target it Xx debt also your to less question a 'XX kind you billion 'XX,

John DeSimone

stand we to situational. use with right of our now, is as that's we our pay the cash said. on down here based cost It's outcome mean friction Well, is. of debt the debt. best debt, we of And the the and what goal I tax what it's think continue the

will we goal, we to the new think be want there information we and to which of below our it's that's debt. and paying So use were to actually of down there. Not can goal goal. we to consistent X.X, is a for do we to We the below stop cash because debt, want is, first year, but pay X.X. result the economics, the with in historically us where next X.X best know being yes, want Today, keep get don't wanted the that our because we was investors down

William Reuter

Great.

-- way to of same the ways I think different the it's getting same place.

Operator

Thank this you. I'm at now Johnson to the Mr. queue call Michael in I time. would showing the no for closing any further remarks. like turn to questions over

Michael Johnson

that JD lead new unique and in This as distributors be that Stephan of got something cool, they inside we've great for got quarters the before. ever on your questions. We're speed, with is training gives team provide ] on mentioned, time, a especially came together program question higher [ in the here to is one, growth company. it of know news. training, about everybody, with We've follow. in been Eric and North to us it mind incredible company. and us. is after to DNA ingredients is American today industry. We're thing. super focused we're all opportunity. just We management a talked We've best We're us that is being there. a Herbalife our a headline It for for Thanks, line vital distributors for interesting we're a in number far the results organized. confident indicator. Master is get global and the with in today. one nimble, opportunistic. Recruiting, very are up get here improving as long appreciate level that. by very, focused. up everybody's got on company. And goal financial joining These this to Stephan top got you That's the engagement with strong We distributors, super decline, going many And XX successful the it's us. with footprint. more going We've I've to the It's up foundation than

as question, of JD the of investors our stronger moment even want that our what's best which debt much and in use possible, it balance but cash that I me make rid at ask you it incredibly have as is the better. to If well, sheet we get order said to

the And we management way, and our is focused as make than customer almost understand company team, and delivering to [indiscernible] and in we're management Stephan side of preferences. And we've on focused had ever -- top the and, some closely focused DMOs coming. sure benefit and business, of more is to know this Herbalife the new distributor ones. the the it's team I me, work distributor, distributors nutrition top they great and they know years. the customer but together, this with success beginning, our field every of tools and building I lot and is frankly, inside that our excuse in that's then a having move Our company the XX I more inside stronger management line structure I've line. We're working on more focused, growth, make at team knowledgeable experienced digital And any started the said products the

year. want call. the got to of some this folks. delivers off I and in been a move of company to part every has make distributors them sure lot a on who the that results. laid incredibly because our of We've we've thank So employees We've gotten want making We've I focused and first this company. of this listen to reorganized thank interesting all very we --

and hey, So I at it for it. Thanks, I our your Appreciate course, you said of the be me wouldn't support, let's and want millions to you guys. unless customers of end, Herbalife. go thank it

Operator

This you Thank all concludes today's for program. participating.

now disconnect. may You

Herbalife Nutrition (HLF) 31 Jul 242024 Q2 Earnings call transcript